Amid fears the United States risks default if lawmakers don't raise the debt ceiling on time, some are suggesting President Obama could save the day by big-footing Congress.

How? By invoking the Constitution and directing Treasury Secretary Tim Geithner to keep borrowing even if it means going past the statutory borrowing limit.

Sounds odd and unbelievable, but hell, it appears to be pretty clear.

From the 14th amendment (section 4, 1st sentence):

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

By enacting social security, medicare, defense appropriations, all the miscellaneous spending, etc, previous congresses and previous presidents have established a very large public debt. All those entitlement programs also result in public debt in the future, unless congress and the president decide to cut back on spending.

They can do that, but if they choose not to and a lot of debt comes due to be paid, a mere law (debt ceiling) which prevents the secretary of the treasury from borrowing money to avoid default is arguably unconstitutional.

Amnorix

06-30-2011, 07:47 PM

I have never understood the debt ceiling. Never. Makes no sense to me.

It's like entering a contract to buy a house and then, when the time comes to close, saying you can't because you can't go into that much debt even though the bank has approved your loan.

Yeah, good luck with that in court.

BucEyedPea

06-30-2011, 08:01 PM

Al, I don't see that clause having anything to do with bypassing congress to raise the debt ceiling. The Constitution authorizes congress regarding revenue NOT the executive branch. There are a separation of powers for a reason and you have to read this as a whole. Geithner is the last person I'd rely on for the Constitution and he's also not elected. He's screwing us. If Obama does this he is a de-facto dictator.

That being said it would be justice to default on the debt since the taxpayer never agreed to pay off bondholders. I would think it would make it difficult for the govt to ever borrow again—a good thing.

Amnorix

06-30-2011, 08:16 PM

Al, I don't see that clause having anything to do with bypassing congress to raise the debt ceiling. The Constitution authorizes congress regarding revenue NOT the executive branch. There are a separation of powers for a reason and you have to read this as a whole. Geithner is the last person I'd rely on for the Constitution and he's also not elected. He's screwing us. If Obama does this he is a de-facto dictator.

That being said it would be justice to default on the debt since the taxpayer never agreed to pay off bondholders. I would think it would make it difficult for the govt to ever borrow again—a good thing.

You're insane.

The taxpayers' chosen representatives and Presidents passed these laws, spending bills, tax bills, etc. You can't just disclaim responsibility for that. This isn't Sparta you lunatic.

Seriously, I'm sorry that our Constitutional system is one that you hate, but that doesn't mean you get to make up all your own rules.

alnorth

06-30-2011, 08:32 PM

Al, I don't see that clause having anything to do with bypassing congress to raise the debt ceiling. The Constitution authorizes congress regarding revenue NOT the executive branch. There are a separation of powers for a reason and you have to read this as a whole. Geithner is the last person I'd rely on for the Constitution and he's also not elected. He's screwing us. If Obama does this he is a de-facto dictator.

That being said it would be justice to default on the debt since the taxpayer never agreed to pay off bondholders. I would think it would make it difficult for the govt to ever borrow again—a good thing.

congress, with 2/3 of the members voting together, can cut as much spending as they want over the president's objections.

The president is not raising new revenue, he's possibly forbidden by the constitution to allow a default if its in his branch's power to stop it. If we don't want a mountain of debt, we need to raise revenue, cut spending, or both.

Using the perhaps-illegal debt ceiling law in a cowardly way to blamelessly cut spending, (allowing the congress to blame the president for not paying whoever didnt get paid) without having the courage to actually cut spending may not work. If you want to cut, then cut. If congress doesn't have the votes, then assuming the courts agree with that interpretation, debt will result.

The funny thing is that congress wrote that sentence into the 14th amendment using such sweeping and emphatic language in an effort to make sure no one had a doubt that debt incurred in the civil war wouldn't be paid. They probably had no idea that, by writing so powerfully and broadly, they may have also forbidden congress from passing a law that caused the nation to refuse to pay a bill they could have paid and to default.

Our debt ceiling may not occur until the treasury auctions fail.

alnorth

06-30-2011, 08:40 PM

Another problem with challenging Obama if he decides to go this route:

who the hell has standing? Whether its right or not may not matter if the courts throw their hands up, say "its political" and refuse to hear the case.

The Roberts court has emphatically emphasized standing, and a group of congressmen wont be able to sue. It will be hard for anyone to argue they were damaged when its easy to argue that defaulting hurts everyone in the country far more than it helps.

BucEyedPea

06-30-2011, 09:19 PM

The president is not raising new revenue, he's possibly forbidden by the constitution to allow a default if its in his branch's power to stop it. If we don't want a mountain of debt, we need to raise revenue, cut spending, or both.
I doubt it. Even Paul says a default is valid. We're bankrupt.

The funny thing is that congress wrote that sentence into the 14th amendment using such sweeping and emphatic language in an effort to make sure no one had a doubt that debt incurred in the civil war wouldn't be paid. They probably had no idea that, by writing so powerfully and broadly, they may have also forbidden congress from passing a law that caused the nation to refuse to pay a bill they could have paid and to default.

Our debt ceiling may not occur until the treasury auctions fail.

One thing you're forgetting, is you can't ignore other parts of the Constitution. Although, I wouldn't put it past some of our justices, who have already ignored parts for their agenda earlier, there are simply no powers granted to the president to take such powers into his own hands.

BucEyedPea

06-30-2011, 09:21 PM

Another problem with challenging Obama if he decides to go this route:

who the hell has standing? Whether its right or not may not matter if the courts throw their hands up, say "its political" and refuse to hear the case.

The Roberts court has emphatically emphasized standing, and a group of congressmen wont be able to sue. It will be hard for anyone to argue they were damaged when its easy to argue that defaulting hurts everyone in the country far more than it helps.

How about we, the people, the taxpayers. We're getting screwed.

dirk digler

06-30-2011, 09:21 PM

I have heard about this option in the last few days and even Tim Geithner talked about it in a PC. It seems pretty clear to me..

Bewbies

06-30-2011, 09:26 PM

I struggle to find one reason people would want it raised...

Dylan

06-30-2011, 09:44 PM

Who is buying U.S. debt?

U.S. caught China buying more debt than disclosed
By Emily Flitter

NEW YORK | Thu Jun 30, 2011

(Reuters) - The rules of Treasury auctions may not sound like the stuff of high-stakes diplomacy. But a little-noticed 2009 change in how Washington sells its debt sheds new light on America's delicate balancing act with its biggest creditor, China.

When the Treasury Department revamped its rules for participating in government bond auctions two years ago, officials said they were simply modernizing outdated procedures.

The real reason for the change, a Reuters investigation has found, was more serious: The Treasury had concluded that China was buying much more in U.S. government debt than was being disclosed, potentially in violation of auction rules, and it wanted to bring those purchases into the open - all without ruffling feathers in Beijing.

Treasury officials then worked to keep the reason for the auction-rule change quiet, with the acting assistant Treasury secretary for financial markets instructing subordinates to not mention any specific creditor's role in the matter, according to an email seen by Reuters. Inquiries made at the time by the main trade organization for Treasury dealers elicited the explanation that the change was a "technical modernization," according to a document seen by Reuters. There was no mention of China.

The incident calls into question just how clear a handle the Treasury has had on who is buying U.S. debt. Chinese entities hold at least $1.115 trillion in U.S. government debt, and are thought to account for roughly 26 percent of the paper issued by Washington, according to U.S. government data released on June 15.

China's vast Treasury holdings are both a lifeline and a vulnerability for Washington - if the Chinese sold their Treasuries all at once, it could undermine U.S. markets and the economy by driving interest rates higher very quickly. Scenarios of this sort have been discussed in Washington defense-policy circles for at least a year now. Not knowing the full extent of these holdings would make it even more difficult to assess China's political leverage over U.S. finances.

The Treasury has long said that it has a diversified base of investors and isn't overly reliant on any single buyer to digest new U.S. Treasury issuance. Evidence that China was actually buying more than disclosed would cast doubt on those assurances.

THE 'GUARANTEED' BID

The United States sells its debt to investors through auctions that are held weekly - sometimes four times per week - by the Treasury's Bureau of the Public Debt, in batches ranging from $13 billion to $35 billion at a time. Investors can buy the bonds directly from the Treasury at auctions, or through any of the 20 elite "primary dealers," Wall Street firms authorized to bid on behalf of customers. The Treasury limits the amount any single bidder can purchase to 35 percent of a given auction. Anyone who bought more than 35 percent of a particular batch of Treasury securities at a single auction would have a controlling stake in that batch.

By the beginning of 2009, China, which uses multiple firms to buy U.S. Treasuries, was regularly doing deals that had the effect of hiding billions of dollars of purchases in each auction, according to interviews with traders at primary dealers and documents viewed by Reuters.

Using a method of purchases known as "guaranteed bidding," China was forging gentleman's agreements with primary dealers to purchase a certain amount of Treasury securities on offer at an auction without being reported as bidders in that auction, according to the people interviewed. After setting the amount of Treasuries the guaranteed bidder wanted to buy, the dealer would then buy that amount in the auction, technically on its own behalf.

To the government officials observing the auction, it would look like the dealer was buying the securities with the intent of adding them to its own balance sheet. This technicality does not preclude selling them later in the secondary market, but does influence the outcome of bidding in the auction, by obscuring the ultimate buyer. In fact, the dealer would simply pass the bonds on immediately to the anonymous, guaranteed bidder at the auction price, as soon as they were issued, according to the people interviewed.

The practice kept the true size of China's holdings hidden from U.S. view, according to Treasury dealers interviewed, and may have allowed China at times to buy controlling stakes - more than 35 percent - in some of the securities the Treasury issued.

The Treasury department, too, came to believe that China was breaching the 35 percent limit, according to internal documents viewed by Reuters, though the documents do not indicate whether the Treasury was able to verify definitively that this occurred.

Guaranteed bidding wasn't illegal, but breaking the 35 percent limit would be. The Uniform Offering Circular - a document governing Treasury auctions - says anyone who wins more than 35 percent of a single auction will have his purchase reduced to the 35 percent limit. Those caught breaking auction rules can be barred from future auctions, and may be referred to the Securities and Exchange Commission or the Justice Department.

The Treasury Department generally does not comment on specific investors but a source in the department said China was not the only Treasury buyer striking guaranteed bidding deals.

People familiar with the matter named Russia as being among the guaranteed bidders. But Russia's total Treasury holdings, while significant, represent 2.8 percent of outstanding U.S. debt, versus one-fourth for China's.

CHANGING THE RULE

Traders at primary dealers did not have the same diplomatic concerns about the level of Chinese buying. But they did have reasons to dislike guaranteed bidding, and they began clamoring for a change. One trader said in an interview he first brought the issue to the attention of Treasury officials in 2007.

Some primary dealers began expressing concern that the deals were opaque in a way akin to the Salomon Brothers Treasury trading scandal in the early 1990s. In that case, traders from the securities firm submitted false bids under other bidders' names in Treasury auctions in order to more closely control the results, and their bids altered the auction prices. The idea that unseen bidders were again influencing auction prices raised similar concerns among traders.

There were also commercial concerns: Dealers say that knowing that the practice was going on at other firms made them less confident they could see and understand overall patterns of buying in the Treasury market. Such visibility can be one of the greatest benefits of being a primary dealer, since the service itself often doesn't pull in big profits directly.

Some traders at primary dealers say they simply refused to do the deals and ended up turning away customers, including China. That irked sales colleagues who were promising clients guaranteed bidding deals.

At the beginning of 2009, Treasury officials began discussing the issue of guaranteed bidders, with a focus on China's behavior, internal documents seen by Reuters show. The culmination of their efforts was a change to the Uniform Offering Circular published on June 1, 2009 that eliminated the provision allowing guaranteed bidding.

Treasury Secretary Timothy Geithner was in Beijing that day meeting with Chinese government officials on his first formal visit to China since taking up his cabinet post. There is no evidence he discussed the rule change with Chinese officials there.

A spokeswoman for the Treasury Department said: "We regularly review and update our auction rules to ensure the continued integrity of the auction process. The auction change made in June 2009 eliminated some ambiguity in auction rules and increased transparency, which ultimately benefits taxpayers and investors."

The rule change had an immediate impact.

In the first auctions conducted after guaranteed bidding was banned, a key metric rose sharply: the percentage of so-called indirect bidders, those who placed their auction bids through primary dealers. Indirect bidders are seen as a proxy measure for foreign central bank buying, because foreign central banks most often bid through primary dealers. With the elimination of the guaranteed bidder provision, far more buyers were put in this class in reports to the Treasury Department.

The seven-year U.S. Treasury note, which was sold in sizes of between $22 billion and $28 billion once a month from February 2009 to September 2009, had an average indirect bid percentage of 33 percent from February through May. But from June to September the average indirect bid rose to 63 percent.

(Graphic: r.reuters.com/hyn42s)

BIDDERS REACT

Shortly after the Treasury revised the auction rules, U.S. officials learned from dealers that some bidders were seeking to continue using guaranteed bids. According to a Treasury document, a large client asked one primary dealer whether the Treasury might make an exception to the new rule for them. Neither the client nor the dealer were named.

Deutsche Bank, Goldman Sachs, JPMorgan, RBS Securities and UBS all received calls from clients asking for secret bid arrangements immediately after the rule change went into effect, according to the internal Treasury document, a summary of inquiries received seeking guidance from dealers after the rule change.

Deutsche Bank, according to the document, said their client canceled a bidding deal. Goldman told Treasury that a large client would be going to other dealers who in the past had done the deals after Goldman turned them away, the document said.

JPMorgan asked if there were any exceptions to the new prohibition on guaranteed bids. RBS said it actually struck a deal with a customer for a guaranteed bid after the rule change, but it used a different structure and wanted to know what was legal. UBS told the New York Fed that its former guaranteed-bidder client would now change its behavior and buy Treasuries in the secondary market directly after an auction, according to the document.

Spokespeople for Goldman Sachs and UBS declined to comment for this story. Deutsche Bank, RBS, and JPMorgan did not respond to requests for comment.

The change came at a delicate time in U.S.-Chinese financial relations. China, long a major buyer of American government securities, was at the time snapping up huge amounts of debt as Washington was suffering a sharp drop in tax revenue during a crushing recession.

Almost all of the business of buying Treasuries on behalf of the Chinese government is conducted by China's State Administration of Foreign Exchange (SAFE), an arm of the Chinese central bank which manages China's currency reserves, which include large amounts of U.S. Treasury bonds.

SAFE, for its part, was facing heat in China over the extent of its U.S. holdings. SAFE was hit hard by the collapse of Lehman Brothers, the doomed investment bank that was SAFE's trading counterparty in the U.S. overnight-lending market. And the potential losses SAFE faced upon the collapse of the U.S.-backed mortgage titans Fannie Mae and Freddie Mac whipped up such a storm in China that Chinese officials publicly berated the Americans for lapses in financial stewardship. (For more, click on link.reuters.com/qec28r )

SAFE officials in Beijing did not respond to a request for comment.

After evidence mounted that China was disconcerted by the auction-rule change, U.S. officials moved to tweak the system, to offset some of the pinch of the stricter bidding rules. The move gave big buyers a way to maintain some anonymity, by increasing the amount of securities it was possible to buy at a single auction without having to declare the purchase in a letter to the New York Fed.

The old requirement stipulated that any purchase of $750 million in Treasury securities had to be declared by the buyer in a letter to the New York Fed. Officials increased the threshold to $2 billion.

'TECHNICAL MODERNIZATION'

The official explanation for eliminating guaranteed bidders did not mention foreign central banks at all. It focused instead on "technical modernization" of auction rules.

One government official warned others in a written message "not to include the words 'China' or 'SAFE' in email subjects." The Securities Industry and Financial Markets Association, the main trade organization for Treasury dealers, asked the Treasury in early June 2009 to explain the change. The Treasury's response: It had found that a detail in its auction rules no longer applied to the way auctions were conducted, and so the rule was changed, according to an internal Treasury memo.

Separately, the Treasury's acting assistant secretary for financial markets, Karthik Ramanathan, told subordinates in an email: "Please let's stick to the 'Modernization of Auction Rules' when outside requests come in on the (rule) change. Please DO NOT emphasize the guaranteed bid portion, or mention any specific investors."

Ramanathan, who left the Treasury in March of 2010 and is now senior vice president and director of bonds at Fidelity Investments in Merrimack, New Hampshire, declined to comment.

The Federal Reserve Bank of New York, which interacts directly with primary dealers on Treasury auctions, issued a strongly worded letter on June 23, 2009, dealers say, urging them to "comply with the spirit as well as the letter of this recent auction rule clarification."

"That was how we knew they wanted us to tell them who was buying what," said a trader at one primary dealer.

for starters, not havng our credit rating lowered to junk status, causing us to not have reasonable access to the bond market for any emergency need for money, no matter what?

Seriously, this fetish some people have for wanting to see a default is completely stupid. If you want to impose fiscal discipline and cut spending, then do it. If you dont have the votes, then go win some elections. Anyone who intentionally causes the country to default should have their ass thrown out of office, and any political party which advocates such a stupid suicidal move should wander the political wilderness for a decade.

alnorth

06-30-2011, 10:02 PM

Who is buying U.S. debt?

U.S. caught China buying more debt than disclosed

This is an idiotic artificially-manufactured crisis. Who bought our debt? I dont give a rats ass. A hedge fund, China, your grandma, who cares. Whoever they are, they are a creditor due interest payments, and eventually their principal. If China suddenly decided to dump several trillion of T-bills in the secondary market, then some of the demand will be soaked up and for a year or two we may pay marginally higher interest rates. OK, so what?

Seriously, some people give this "China has a lot of our debt" boogeyman more weight than it deserves.

Dylan

06-30-2011, 10:06 PM

One would have to understand economics before one could deliver an economic message.

Obama, Are you bending over? Listen...

BucEyedPea

06-30-2011, 10:11 PM

May I ask where the Constitution mentions a debt ceiling. Having a debt is one thing but a ceiling?

BucEyedPea

06-30-2011, 10:17 PM

Ever since 1917, Congress has allowed the Treasury the discretion to issue new debt (i.e., borrow money from other agencies or individuals). At that time, the thinking was that the executive branch needed the ability to make quick financing decisions to fund the war effort. However, Congress didn't want to completely cede its control of the purse strings, and so it set a cap on how much total debt the Treasury could owe at any given time.

After the first World War, the US government really did sharply slash spending, and in fact the Coolidge administrations retired a sizable portion of the debt. But ever since Herbert Hoover's fateful presidency, the federal debt has mushroomed, and the growth during our financial crisis has been breathtaking.
http://mises.org/daily/5000

Looks to me like Congress put the debt ceiling in so they didn't cede their Constitutional control over the purse strings. Sounds like the debt ceiling is Constitutional to me. Now say that the debt is a valid debt is a different category of thing.

This sounds like another "living Constitution" claim the left loves so they can make it mean whatever they want to do whatever they want. So far, my googles are showing this rationalization as stemming from left wing sources.

If they don't have the money, like most everyone else these days they can cut back.

alnorth

06-30-2011, 10:21 PM

Looks to me like Congress put the debt ceiling in so they didn't cede their Constitutional control over the purse strings. Sounds like the debt ceiling is Constitutional to me. Now say that the debt is a valid debt is a different category of thing.

This sounds like another "living Constitution" claim the left loves so they can make it mean whatever they want to do whatever they want. So far, my googles are showing this rationalization as stemming from left wing sources.

If they don't have the money, like most everyone else these days they can cut back.

The congress arguably ceded their ability to strategically default when they wrote the 14th amendment. The 14th amendment is not exactly vague or hard to interpret as far as the legality of the debt ceiling is concerned.

Many states and cities defiantly violated the 2nd amendment for generations, but that isn't going to stop the supreme court from putting an end to that.

BucEyedPea

06-30-2011, 10:29 PM

The congress arguably ceded their ability to strategically default when they wrote the 14th amendment. The 14th amendment is not exactly vague or hard to interpret as far as the legality of the debt ceiling is concerned.
Sounds to me you agree with it. I don't see it. They may not be raising revenue per se but it's revenue related— a sort of dishonest back door.

Many states and cities defiantly violated the 2nd amendment for generations, but that isn't going to stop the supreme court from putting an end to that.

Thats because the 2nd amendment applied to the Federal govt, as do the other BoRs, before and after the 14th amendment.

If you read that link I put up above, it talks about options Treasury has if a default is so bad. But any default would be bad for those whose wealth is more connected to the State. On the other hand it "eliminates future tax liabilities. To the extent that people correctly anticipate those liabilities, the value of private assets (including human capital) should rise over the long run by the same amount that the value of government securities falls."

If on the other hand, people underestimate their future tax liabilities, they suffer from a fiscal or "bond illusion" in which Treasury securities make them feel wealthier than they actually are. Debt repudiation will bring their expectations into closer alignment with reality, which should increase saving.

Perhaps the strongest argument for not raising the debt ceiling is that the United States is bound to default — whether explicitly by reneging on payments, or implicitly by massive inflation — at some point anyway in the next decade or two. http://mises.org/daily/5000

Slashing spending is the ONLY practical way to improve the economy. It would return needed resources to the private sector, where they would do the most good.

Bewbies

06-30-2011, 11:46 PM

for starters, not havng our credit rating lowered to junk status, causing us to not have reasonable access to the bond market for any emergency need for money, no matter what?

Seriously, this fetish some people have for wanting to see a default is completely stupid. If you want to impose fiscal discipline and cut spending, then do it. If you dont have the votes, then go win some elections. Anyone who intentionally causes the country to default should have their ass thrown out of office, and any political party which advocates such a stupid suicidal move should wander the political wilderness for a decade.

I don't want to see us default. In fact, I'd like to see us become a nation free of debt.

Saul Good

07-01-2011, 08:33 AM

It says that the debt we have incurred is valid, not that we are free to run up more debt. We bring in more than enough revenue to make our payments without raising the ceiling. It would require us to cut spending, though.

BucEyedPea

07-01-2011, 08:54 AM

It says that the debt we have incurred is valid, not that we are free to run up more debt. We bring in more than enough revenue to make our payments without raising the ceiling. It would require us to cut spending, though.

It also doesn't say we must raise the debt ceiling if there is a debt. We're not even in a legal state of war to justify it.

ROYC75

07-01-2011, 09:20 AM

but that doesn't mean you get to make up all your own rules.

But our dear leader with all of his cronies in the democratic house and senate did for 2 years on the HC law.

BucEyedPea

07-01-2011, 09:22 AM

But our dear leader with all of his cronies in the democratic house and senate did for 2 years on the HC law.

As I recall some democrats were saying they could do whatever they wanted and 'f the rules basically. I paraphrased the last 4 words though.

[The proposed amendment] puts the debt incurred in the civil war on our part under the guardianship of the Constitution of the United States, so that a Congress cannot repudiate it. I believe that to do this wil give great confidence to capitalists and will be of incalculable pecuniary benefit to the United States, for I have no doubt that every man who has property in the public funds will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress.

HonestChieffan

07-01-2011, 12:44 PM

May I ask where the Constitution mentions a debt ceiling. Having a debt is one thing but a ceiling?

I looked and it doesn't mention speed limits. Can we just drive as fast as we want then? Does not say a word about pilot licenses either.

[The proposed amendment] puts the debt incurred in the civil war on our part under the guardianship of the Constitution of the United States, so that a Congress cannot repudiate it. I believe that to do this wil give great confidence to capitalists and will be of incalculable pecuniary benefit to the United States, for I have no doubt that every man who has property in the public funds will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress.

Sorry—strawman. We're talking about a debt ceiling and a president taking powers not allocated to him as if he's a dictator. They have a few other options.

The Mad Crapper

07-02-2011, 05:36 PM

It also doesn't say we must raise the debt ceiling if there is a debt. We're not even in a legal state of war to justify it.

Oh, we're at war alright.

Obuttocks declared it.

JohnnyV13

07-02-2011, 06:43 PM

The text of the 14th Amendment qualifies that only debt "authorized by law" is valid and shall not be questioned.

Now, Obviously, things like medicare, medicaid, s.s. ect are authorized by their enabling acts. So, on their face, these debts are "authorized by law".

Yet, the debt ceiling seems to create another "hoop" in order for a debt to be "authorized by law', which is that the debt must not cause the united states to exceed a certain ceiling.

For this amendment to make the debt ceiling unconstitutional, you would have to rule that it somehow removes the power of Congress to set an automatic condition which removes legal authorization (a cap), while allowing automatic authorization of spending under things like medicare/medicaid and S.S.

There is also an argument that no debt has been "authorized" by law for over a year, since Congress has not passed a budget. Though, I find this analysis highly doubtful, since I do not recall any Constitutional requirement for a budget before Congress can exercise its tax and spend power.

The Mad Crapper

07-02-2011, 06:49 PM

The text of the 14th Amendment qualifies that only debt "authorized by law" is valid and shall not be questioned.

Now, Obviously, things like medicare, medicaid, s.s. ect are authorized by their enabling acts. So, on their face, these debts are "authorized by law".

ROFL ROFL ROFL ROFL ROFL ROFL ROFL ROFL ROFL ROFL ROFL ROFL ROFL

Now that's some funny moonbat shit right there

Ugly Duck

07-02-2011, 07:04 PM

It says that the debt we have incurred is valid, not that we are free to run up more debt.

Right... this debt ceiling thingie isn't about balancing some future budget - its about coming up with the money to pay bills that we already have. The Republis are saying we already ran up a bill & now we're just not going to pay it. Failure to raise the debt ceiling means we are refusing to pay off obligations that we already have made. Its financial default on existing obligations, not some future budgetary thing.

default: In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract. A default is the failure to pay back a loan.[1] Default may occur if the debtor is either unwilling or unable to pay their debt.

BucEyedPea

07-02-2011, 11:01 PM

The text of the 14th Amendment qualifies that only debt "authorized by law" is valid and shall not be questioned.

Now, Obviously, things like medicare, medicaid, s.s. ect are authorized by their enabling acts. So, on their face, these debts are "authorized by law".

Yet, the debt ceiling seems to create another "hoop" in order for a debt to be "authorized by law', which is that the debt must not cause the united states to exceed a certain ceiling.

For this amendment to make the debt ceiling unconstitutional, you would have to rule that it somehow removes the power of Congress to set an automatic condition which removes legal authorization (a cap), while allowing automatic authorization of spending under things like medicare/medicaid and S.S.

There is also an argument that no debt has been "authorized" by law for over a year, since Congress has not passed a budget. Though, I find this analysis highly doubtful, since I do not recall any Constitutional requirement for a budget before Congress can exercise its tax and spend power.

Hey, did you see this article about Ron Paul’s Surprisingly Lucid Solution to the Debt Ceiling Impasse (http://www.tnr.com/article/politics/91224/ron-paul-debt-ceiling-federal-reserve) in, of all places, The New Republic?

I'd be interested in your take.

JohnnyV13

07-03-2011, 01:26 PM

Hey, did you see this article about Ron Paul’s Surprisingly Lucid Solution to the Debt Ceiling Impasse (http://www.tnr.com/article/politics/91224/ron-paul-debt-ceiling-federal-reserve) in, of all places, The New Republic?

I'd be interested in your take.

That's a really interesting idea.

I can see the advantages, and I also see why Paul likes the idea. If you can't get rid of the Fed, you at least get rid of 1.6 trillion that they won't have to play monetary games (over the next 2 years).

And, you reduce debt service, AND you pretty much obligate the Fed to raise reserve requirements. Paul likely sees that as a long term benefit in that it limits the abilty of banks to multiply the money supply.

So Paul gets some things he wants. But, the dems get to avoid a very damaging default. Overall, we get to inject a little sanity into the system. Owing yourself 1.6 trillion and paying interest to yourself to service that debt seems silly, especially since there are likely collection inefficiencies at play.

Sounds like a workable, realistic political solution to me.

I bet the repub party isn't exactly happy with Paul, though, since they are hoping to force political concessions for their "best constituents" in return for raising the debt celling.

I also suspect some bankers will be VERY unhappy. i know the Fed is a mixture of public and private interests, but I have never studied its structure in detail. How will destroying 1.6 trillion in bonds affect the private performance of banks? Or, do some of those bankers have bonuses tied to the profitability of Fed assets?

I can't analyze that, nor do I know how much political pressure these guys could bring to bear.